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By Lively | February 13, 2018

HSA Hack: Emergency Savings

You might know about all of the standard HSA benefits. Triple-tax savings has to top the list. An HSA is one of the most advantageous tax-savings vehicles on the market. It is also the only long-term dedicated health account. 

HSA rules and regulation create a clear path for health savings and using tax-free dollars to pay for qualified out-of-pocket medical expenses. However, if you understand some of the more nuanced IRS rules and regulations you can legally hack an HSA into an emergency fund or a totally tax-free investment account simply by understanding how reimbursement of those qualified out-of-pocket medical expenses works.

We will help you get the most out of your HSA. No calculator or abacus required.

The Secret Code

The normal HSA reimbursement process works like this. You open and establish an HSA. From that date, once you incur a qualified out-of-pocket medical expenses you can reimburse yourself. Within 2-3 business days, the money is moved from your HSA to your normal checking or saving the account. But what if you didn’t move that money. What if you saved that receipt, and all other qualified out-of-pocket medical expenses bills. What if you went back and found all qualified out-of-pocket medical expenses that you forgot about, from anytime after you have opened and established your HSA.

IRS rules and regulations allow you to reimburse yourself with HSA funds for a qualified out-of-pocket medical expense at ANYTIME, as long as you were eligible. That means you can do it today, tomorrow or 20 years from now. So why would you wait? Let us show you why this new option is a simple but effective HSA hack. You can see the full list of eligible out-of-pocket medical expenses here.

Your New HSA Options

  1. Emergency Fund – By saving these already expensed allocated dollars, you have effectively created a Tax-Free Non-Medical Saving Account within your HSA. This is a subtle yet crucial difference. You have unlocked the option and flexibility to use this money, for anything, at any point, moving forward. With the already existing, tax-free distribution provision of the HSA, you can take this money out with no tax implications.
  2. Invest Tax-Free – ok, you can always invest HSA money tax-free, but if you continue to save more money in your HSA, you have more money to invest. If you need to, you can now take out this money at any time in case of an emergency. In any situation having more money to invest can increase your potential for investment returns*. This increases the opportunity for HSA fund growth through the simple but incredible power of compound interest. If you need to access that emergency fund in a few years, you can, but you can also put that money to work for a extra few years.

The complications of the IRS HSA tax code present opportunities for more customization and flexibility, if you understand the details. Using an HSA to your fullest advantage only increases your savings and investment opportunities. 

If you need more help with health account decisions, check out our blog. We will make you a healthcare benefits expert in no time, without any extra work or effort on your end.

*Please consult a licensed financial expert for all investing and tax advice before investing your HSA funds. Nothing in this post is intended to be tax or investment advice.